Bitcoin spot price is facing huge selling pressure, breaking below key multi-month support levels around $53,500 to $56,000. With bears taking over, there are fears that the coin could eventually fall further, towards the $50,000 or even $40,000 levels in the event of a continuation of the bear trend.

Bitcoin sellers test resolve of determined activist investors

Despite widespread doubts, some on-chain indicators point to strong Bitcoin prices. Notably, one analyst noted that Bitcoin prices have fallen below the “medium risk floor of 9% of the average active investor purchase price” for the fifth time in 18 months.

If history is any guide, prices will likely rebound from spot prices, recouping the sharp declines seen over the weekend and on Monday morning, August 5th.

Looking at price data, the average purchase price for these active investors (or addresses that have purchased BTC in the past 155 days) is currently $48,000.

Earlier yesterday, on August 5, when the price crashed, BTC fell to a low of $49,000 before rebounding higher. So even with the drop, most active investors haven’t gone into full panic mode yet. Once the $48,000 level is breached, challenges will emerge to test the resolve of these investors.

At this point, judging by the magnitude of the plunge and the volume that followed, it’s clear that bulls are not out of the woods yet. If BTC were to fall again in the coming sessions, breaking below $50,000 and $48,000, weak investors could opt out, exacerbating the sell-off.

BTC enters bearish pattern after decline: is it time to take a contrarian approach and buy?

From a technical perspective, Bitcoin is currently in a bearish breakout pattern after closing below consolidation levels. With the sharp reversal of July gains, the probability of a decline this week is high. From this perspective, Bitcoin could drop to $40,000 in a bearish trend continuation pattern.

Currently, in terms of price activity, Bitcoin’s market value to realized value (MVRV) ratio is at levels last seen during the FTX crash in November 2022. The MVRV ratio measures whether the token can be purchased at a discount.

Although the coin fell to as low as $15,800, the subsequent recovery supported the bull run in 2023 to early 2024. Therefore, if the events of August 5 reflect the panic selling in late Q4 2022, Bitcoin could see a discount.